John Key on the Average Wage

So, Key promised $50 of tax cuts to the average New Zealander, did he? Here's how Stuff reported on what he actually delivered:

National will deliver tax cuts worth $47 a week to workers on the average wage of $45,000 - most delivered in April 2009.

And here's how The New Zealand Herald reported it:

In his speech notes Mr Key said the bulk of the cut would come on April 1 2009, meaning a worker on the average wage of $48,000 would be better off by an additional $18 a week above Labour's cuts from that date.

Problem is, of those figures, neither is what the average wage is. Neither of them is even close. The average worker in New Zealand makes less than $40,000. Most figures show the average worker earns about $37,000. The CTU says two thirds of workers earn less than John Key's imaginary "average wage".

The actual figures are so trivially easy to look up that I can't believe it's an honest mistake. Key is trying to mislead people, and make his tax cuts look better than they are. Unfortunately, before we get the hard details and somebody codes up a calculator, we're not really going to know why he pulled these figures out of his ass.

It only shows how out of touch he is with ordinary New Zealanders: he doesn't realize that more than half of us would love to be earning $40,000, let alone $45,000 or $48,000.

Comments

My favourite bit of that picture is the strong upward trend on the graph in the background (the documentary was before Black Monday).

If you want to see the whole thing, including the playing-squash-in-tiny-shorts scene, check out the second episode of this year's season of The Unauthorised History of New Zealand. It's free on ondemand.

I'm on $40k. I dont really love it. I wish i had less. HA

Is it possible that the tax cut that National is (i use the term loosely) offering will give a greater percentage tax cut for the lower income earners?

I would be nice to know which part of the tax the tax cut is coming from to be honest. I got an extra $30 in my account from the labour tax cut but where does that come from? If its from the lowest end of my tax bracket then i wont get more of a tax cut the more i earn. I think i know what i mean. Maybe not.

That and one of your quote marks isn't showing the whole thing. FAIL

Nope. It's not possible. In fact, National just isn't offering a tax cut for lower income earners, beyond what Labour has already implemented. And I bring graphs.

Here's the relevant comparison:
http://www.thestandard.org.nz/wp-content/uploads/2008/10/relative-tax-cuts1.png

You'll be be unaffected by National's first round of tax cuts. Their second and third rounds will actually make you worse off. And that's not including their cutbacks: Kiwisaver from 4% to 2%, no employer tax credits (meaning the employer will pass the 2% cost of their contribution back to you - a 2% decrease in salary if you're on Kiwisaver), cutting your $20 a week Kiwisaver government contribution.

Taking your $40k as an example, if you're not a Kiwisaver member, you're not affected until 2010, and then you're worse off. If you are a Kiwisaver member, right out of the gate you'll be losing money every week.

Here's Labour's cut, on the other hand:
http://www.thestandard.org.nz/wp-content/uploads/2008/10/labourscutscombined1.png

Notice how the maximum percentage tax cut coincides with the income band the most people are in (the yellow).

If you want the executive summary, Labour has offered tax cuts for everyone, but focussing on the average worker (who earns less than $40k). National has taken that policy, added tax cuts for the rich, and called it "tax cuts for ordinary New Zealanders".

It's just disingenuous.

I love how you focused on one single part of a huge economic policy, Dominic. You're usually more objective than this, and so I'm surprised.

We all know I'm partisan as all hell, so here's where I put you straight:
Yes, they're cutting Kiwsaver to 2% - but that is just the minimum you can put in. If you want to put 4% in to your Kiwisaver account, Dominic, you're more than welcome. National's plan won't stop you. Yes, they're taking away tax credits for businesses; so that they can pay for the rest of the economic policy. Kiwisaver does only affect an estimated 300,000 people in New Zealand's working population, however, so let's move on and see what else National have pledged...

An Independent Earner Rebate, to cover some 900,000 people not covered by Working for Families because they are low-income singles or couples with no children. This means that workers earning $24k - $50k will get back $10 p/week in the first year and $15 p/week in the second.

Secondly, new income tax brackets:
* Tax rate of 12.5 per cent for income up to $14,000
* 21 per cent for income between 14 and 48,000
* 33 per cent for income between 48 and 70,000
* 38 per cent for income over $70,000

as at 1 April, 2009. Further tax cuts (incl. those proposed by Labour) would be implemented until the final goal is reached in 2011.

Yes, National and Key originally offered $50 p/week cuts. But then Treasury opened its books, and it would not have been fiscally responsible to continue to offer such a cut - so they cut it back by $3 to make it responsible. They also clearly illustrated where the money was coming from; by taking away tax credits that will not affect a majority of people - a 15% R&D tax credit (which is hardly a big deal; so huge, multi-billion dollar corporations might have to absorb a little bit of cost into their bottom line if they want to keep posting excessive profits) and the tax credit on Kiwisaver employer contributions. If they pass the cost of that onto you, the employee, then that money (an extra 2%) is going into your Kiwisaver scheme. Meaning, if you save the minimum 2% and your employer takes 2% off you to make up their requirement, then 4% of your paycheck is going into your Kiwisaver account. Wait, that seems like a lot.. oh no! Its exactly the same as is going in now. Funny how that works? So 300,000 people won't be worse off than they are now AND there'll be money to fund tax cuts without borrowing or having to excessively cut government spending.

Sounds financially responsible to me - but that's what you get from a guy with economic experience, instead of a Doctorate in History.

"I love how you focused on one single part of a huge economic policy, Dominic. You're usually more objective than this, and so I'm surprised."

What? I focussed on one specific part of the policy announcement, because to go any further would be partisan. And so you accuse me of not extolling the obvious "objective" benefits of the rest of National's policy?

From what I've said in the news item, nothing - absolutely nothing - is anything but objective. Point it out. I dare you.

It's simple: Key is wrong about the average wage, and he knows he's wrong (further evidence for that on application). That's pretty much all I've said. If you want to debate that, you'll have to contradict either of those points. You can't contradict the first, and I'd love to see you try the second.

"Yes, they're taking away tax credits for businesses; so that they can pay for the rest of the economic policy. Kiwisaver does only affect an estimated 300,000 people in New Zealand's working population"

The "tax credits for businesses" you refer to are used to offset the cost of employers' compulsory contribution. Given that National's policy is to repeal the law that prevents employers passing their contribution on to employees (effectively, giving a 2%/4% pay cut to employees if they're on Kiwisaver), removing the employer tax credits is to take away 2% of the annual income of a Kiwisaver member now, and 4% by 2011. (The 4% bit is the only part you missed).

Right, so. At the moment, you pay 4%, your employer pays 2%, the government pays 4% (up to $1042), and you get 6 - 10% in your account at the end of the day. Come 2011, you pay 4%, your employer pays 4%, government another 4%, and you get 8 - 12%. (There's an intermediate stage of 4%, 3%, 4% = 7 - 11%).

Here's how that's different under National. Under National, you pay 2% (or 4% if you want), you are made to pay another 2% by your employer, the government gives you not much if you're an average wage earner (the 2% is only paid in full if you earn $52,000 or more), and you end up with a little over 4%, 4% of which you contributed yourself.

That's not "exactly the same" as it is now, and if you think it is, you don't understand how the employer contribution works, and what employers have been doing to escape the intent of the law. (I speak specifically of this recently closed loophole, that National plans to reopen: http://tinyurl.com/4xdtqt)

As for your 300,000 figure, there's no need to estimate - the IRD keeps detailed enrolment statistics (they have to). And you're _way_ off base. There's over 785,000 Kiwisaver members - more than 200,000 are under 25! - and that was back in August. That's 36% of working New Zealanders, and the number's rising. It's not a majority, yet, but you can't write it off either.

It'll try to write a news item to make that 2%/4% stuff clear.

Okay, I understand that.

However, I agree with the sentiment behind reducing it - that in the current economic climate, Kiwis need money in the hand, not in a bank where they can't touch it. Especially not when its under government control.

I've disagreed with Kiwisaver from the start; yes we need to save more and spend less but taking a percentage of my paycheck without me looking and only allowing me to have it back when I'm going to spend it on something the government approves of is just far too nanny-state for my liking.

And you're doing that name thing again. It is, Alyx, kinda horrible. Palin does it a lot. "Well, yaknoo, Jooe, ..."

I write arguments the same way I'd say them, and when I'm particularly indignant, I punctuate comments with names, Dominic.

Its just my style. Like your hideous 's.

Also, I'm curious to know why you blame Stuff and the Herald's misreporting of "the average wage" on John Key. Here's the text of his speech:

http://www.nzherald.co.nz/nz-election-2008/news/article.cfm?c_id=1501799&objectid=10536469&pnum=0

And no where in it does he reference an actual figure for "the average wage". Not "John Key's imaginary figure", after all.

Just misreporting; not surprising from the Herald, just the other day I caught them referring to candidates standing in the US elections for the House/Senate this November as MPs.

"By 1 April 2011 National's tax-cut programme will deliver a worker on the average wage a tax reduction equal to $47 a week, as compared to the taxes New Zealanders have been paying for the past nine years. As I have previously indicated, this $47 total includes the 1 October 2008 tax cuts.

The bulk of our tax package will be delivered on 1 April next year, when it will deliver an additional $18 a week to someone on the average wage."

That's from the text of the speech. Either the $47/18 figures are wrong, or the "average wage" comment is wrong. Which is it?

How do you figure that its one or the other?

I haven't read most of this but im agreeing with Alyx. Isn't that just crazzzzzzyyyy.